Response speculate about to pops: China and US and which will be first.
One Response to Debt-Financed Trade Caused The New Depression
Tarbosaurus Bataar says:
February 5, 2011 at 2:30 pm
Had a chat with a friend from China who was convinced that foreign analysts do not understand China and there is no bubble. The only concern he mentioned is the widening income gap between the rich and the poor which could lead to social unrest. Even last year there were 70,000(!) unreported protests in China. Property markets in the region got a boost from Chinese investors lately, which could also be a sign that some of them have worked out escape plans, in addition to storing their wealth abroad.
I tend to think that China is a bubble, but whether that bubble will burst first or the US (public) debt bubble, that remains to be seen. And the investment implications can be different. If China pops first, that will have a negative impact on commodities (and Australia, Brazil, Argentina etc. will get hurt immensely). At the same time the dollar may rally and gold could decline temporarily. If the US pops first, then the dollar collapses and all other currencies will lose value relative to gold and other commodities.
Currently it looks like that China will pop first, because the US will keep printing money and the Chinese have two options,:
1. keep the currency peg, but then their inflation problem will get worse and worse
2. strengthen their currency vs the dollar, but then a lot of companies (export oriented) will go out of business because their profit margin is so thin that a significant CNY appreciation would erode those margins
Would be curious to hear other people’s investment thesis. |
